The U.S. agency that pays the government’s electric bills and is the largest consumer of energy in the nation’s capital has urged D.C. regulators to reject a multibillion-dollar utility industry merger unless it provides a better deal for U.S. taxpayers, according to a new filing in the case.
Attorneys for the General Services Administration wrote that the proposed merger of D.C.-based Pepco and Chicago-based nuclear energy giant Exelon fails a key test: to treat large energy users — like the federal government — fairly. The deal subsidizes the rates of residential customers at the expense of federal taxpayers and, therefore, “should be found not to be in the public interest” unless changes are made, the agency said in the filings reviewed by The Washington Post.
The GSA’s decision, made in an “initial brief” filing, is not a formal statement of opposition. But it surprised opponents of the proposed $6.4 billion deal, which would create the largest electric utility holding company in the country.
“We’re super-excited. I did not see it coming,” said Anya Schoolman, who has helped lead an energetic but poorly funded group of environmentalists and clean-energy advocates against the merger. Schoolman said the GSA filing puts the city’s largest electric customer squarely against key parts of the agreement and raises a new question about whether the D.C. Public Service Commission could reject parts of the plan or modify it.
“Exelon has been saying it’s all or nothing, take it or leave it,” she said of the compromise negotiated by Mayor Muriel E. Bowser’s office. “So we’re going to advocate for leaving it.”
The GSA’s decision represents a reversal of what the agency has said its role is in evaluating the merger. In interviews, GSA officials had said the merger evaluation period is not the time for the agency to make a stand on fighting disproportionate rates for commercial customers. But the filing Wednesday takes a different tack, saying that commercial ratepayers should be compensated for the merger to go through.
An email to two GSA representatives Thursday morning asking for an explanation of the decision was returned late Thursday. In that email, a spokesman declined to comment on the record, saying in part that the terms of the Setttlement Agreement are not in the public interest and that GSA neither supports or opposes the merger.
Bowser spokesman Michael Czin said the administration negotiated a good deal for the whole city.
“Through months of negotiations and engagement of many interested parties, the administration was able to reach a settlement that best serves residents and business owners with a $78 million investment in affordability, reliability and sustainability,” he said. “The application is now in the hands of the independent Public Service Commission who will ultimately approve or reject the merger.”
Because of the timing, the impact of the government’s reversal was not immediately clear. Often late filings carry little or no weight. The GSA declined to file comments for or against the merger before a deadline to make the federal government’s position part of the legal record in the regulatory case. And early this month, the GSA excused itself from its role in cross-examining the two companies in hearings before the Public Service Commission. A decision from the PSC is expected early next year.
Representatives from Pepco and Exelon, in a joint statement, maintained that the merger was good for all parties involved: “All customers, including the GSA, will benefit from merger commitments now before the commission including improvements in service reliability, investment in sustainability and the economy of the District, and synergy savings that will go back to customers through rates that are lower than they would be absent the merger.”
The GSA’s move complicates a mega-merger that has already become mired in accusations of pay-to-play politics in the District. After approvals in other states, the PSC initially rejected the merger in August.
But Exelon and Pepco lobbied nonprofit organizations across the city to publicly support the merger, saying millions in philanthropic donations would be dependent on the merger going through. Exelon has since mounted a major public relations campaign to build support, including hiring the head of a political action committee that backed Bowser to lobby her administration on the merger. The hiring of the lobbyist and former head of FreshPAC, Earl “Chico” Harkin, was first reported by WAMU-FM.
For that and other reasons, the merger has become a thorny issue for Bowser (D). After the merger was initially rejected, she put herself at the center of the deal, directing City Administrator Rashad Young and administration attorney Mark Tuohey to privately negotiate a package of about $70 million in concessions from the companies. That included short-term rate relief for residents and for environmental projects. Bowser then threw the full weight of her administration behind the deal and successfully urged D.C. regulators to fast-track a second review of the deal.
An analyst who studies such mergers said the GSA’s decision not to support the merger is probably an attempt to get a better deal from Exelon.
“It looks like a party in the case is trying to extract better terms for itself, which is not unusual in this kind of proceeding,” said Paul Patterson, a utility analyst for Glenrock Associates. “I would be surprised if, in and of itself, it has a critical impact on the proceedings.”